NCLAT Allows Appeal of Financial Creditor Against Classification as Unsecured Creditor in Liquidation Proceedings. The Tribunal remanded the matter for fresh consideration of whether the creditor's claim based on bill discounting facilities should be treated as secured or unsecured under the Insolvency and Bankruptcy Code, 2016.

Tribunals: National Company Law Appellate Tribunal Bench: CHENNAI In Favour of Accused

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2026-05-19 02:32:01

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Case Note & Summary

The appeal was filed by Bizloan Private Limited, a financial creditor, against the order of the National Company Law Tribunal, Mumbai Bench, dated 19.12.2023, which classified the Appellant as an unsecured creditor instead of a secured financial creditor in the liquidation proceedings of Autocop (India) Private Limited (Corporate Debtor). The Appellant had provided credit facilities of Rs. 1 Crore in the form of sales bill discounting and purchase bill discounting. The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor on 16.03.2022, and the Appellant filed its claims in Form C on 04.04.2022, which were admitted without specifying whether they were secured or unsecured. The Appellant later discovered through a resolution plan dated 16.12.2022 that it had been classified as an unsecured creditor. Aggrieved, the Appellant filed an IA before the Adjudicating Authority, but by then the Corporate Debtor had moved into liquidation. The NCLAT, after considering the submissions, set aside the impugned order and remanded the matter to the Adjudicating Authority for fresh consideration, directing that the Appellant be given an opportunity to present its case regarding the classification of its claim.

Headnote

A) Insolvency and Bankruptcy Code - Classification of Creditors - Secured vs Unsecured Financial Creditor - Sections 52, 53 of Insolvency and Bankruptcy Code, 2016 - The appeal challenged the order of the Adjudicating Authority classifying the Appellant as an unsecured creditor instead of a secured financial creditor. The Appellant had provided credit facilities in the form of sales bill discounting and purchase bill discounting. The NCLAT held that the classification must be determined based on the nature of the security interest and the documentation, and remanded the matter for fresh consideration. (Paras 1-3)

Issue of Consideration

Whether the Appellant, a financial creditor providing sales bill discounting and purchase bill discounting facilities, should be classified as a secured financial creditor or an unsecured creditor in the liquidation proceedings of the Corporate Debtor.

Final Decision

The appeal is allowed. The impugned order dated 19.12.2023 is set aside. The matter is remanded to the Adjudicating Authority for fresh consideration, with a direction to give the Appellant an opportunity to present its case regarding classification of its claim.

Law Points

Classification of creditor as secured or unsecured
Financial creditor rights under IBC
Liquidation proceedings
Adjudicating Authority's jurisdiction

Case Details

2024 LawText (NCLAT) (01) 29

Comp. App. (AT) (Ins) No. 210 of 2024 & I.A. No. 718 of 2024

2025-07-03

Naresh Salecha

For Appellant: Mr. Mohit Choudhary, Mr. Jayesh Gupta, Mr. Arjun Arora & Mr. Mohit Gulia; For Respondent: Mr. Bharat Gupta, Mr. Varun Tyagi, Mr. Saurabh Khanijon & Mr. Ishan Srivastava

Bizloan Private Limited

Mr. Amit Chandrashekhar Poddar (Liquidator for Autocop (India) Private Limited)

Nature of Litigation

Appeal against order classifying financial creditor as unsecured creditor in liquidation proceedings.

Remedy Sought

Appellant sought reclassification as secured financial creditor.

Filing Reason

Appellant was classified as unsecured creditor instead of secured financial creditor in the liquidation proceedings.

Previous Decisions

Adjudicating Authority passed order dated 19.12.2023 classifying Appellant as unsecured creditor.

Issues

Whether the Appellant is a secured financial creditor or an unsecured creditor in the liquidation of the Corporate Debtor.

Submissions/Arguments

Appellant argued that it provided secured credit facilities and should be treated as secured financial creditor. Respondent (Liquidator) contended that the classification was correct based on available documents.

Ratio Decidendi

The classification of a creditor as secured or unsecured must be determined based on the nature of the security interest and documentation, and the creditor must be given an opportunity to be heard before such classification is finalized.

Judgment Excerpts

The present appeal has been filed by Bizloan Private Limited who is the Financial Creditor for providing credit facilities in form of sales bill discounting (SBD) and purchase bill discounting (PBD) of Rs. 1 Crore in aggregate to the Autocop (India) Private Limited i.e., the Corporate Debtor (now under liquidation) against the Impugned Order dated 19.12.2023... which classified the Appellant as Unsecured Creditors instead of Secured Financial Creditor.

Procedural History

CIRP initiated on 16.03.2022; Appellant filed claim on 04.04.2022; Resolution plan dated 16.12.2022 showed classification as unsecured; Appellant filed IA; Corporate Debtor moved into liquidation; Impugned order dated 19.12.2023; Appeal filed on 2024.